March 2011 Progress Report on The World Bank Group Country Partnership Strategy Supporting Growth and Development in Georgia 2010 - 2013 CURRENCY EQUIVALENTS GOVERNMENT FISCAL YEAR (Exchange Rate Effective March 9, 2011) January 1 to December 31 Currency Unit = Lari WEIGHTS AND MEASURES US$1 = 1.71 Lari Metric System ABBREVATIONS AND ACRONYMS AAA Analytical & Advisory Activities JNA Joint Needs Assessment ADB Asian Development Bank KfW Kreditanstalt für Wiederaufbau AF Additional Financing LGU Local Government Units BDD Basic Data and Directions MCC Millennium Challenge Corporation BEEPS Business Environment and Enterprise Performance MDG Millennium Development Goals Survey MDRI Multilateral Debt Relief Initiative CA City Alliance NBG National Bank of Georgia CCG Chamber of Control of Georgia NPL Non-Performing Loan CIDA Canadian International Development Agency OSCE Organization for Security & Cooperation in CPA Country Procurement Assessment Europe CPS Country Partnership Strategy PEFA Public Expenditure & Financial Accountability CPSPR Country Partnership Strategy Progress Report PER Public Expenditure Review DPO Development Policy Operation PHRD Japanese Policy and Human Resource EBRD European Bank for Reconstruction and Development Development EC European Commission PIU Project Implementation Unit EIB European Investment Bank RICA Rural Investment Climate Assessment FDI Foreign Direct Investment ROSC Accounting and Auditing Report on the FSA Financial Sector Assessment Observance of Standards and Codes GDP Gross Domestic Product SBA Stand-by Arrangement GEL Georgian Lari SME Small and Medium-size Enterprises GNFS Goods and Nonfactor Services SIDA Swedish International Development GTZ German Agency for Technical Cooperation Cooperation Agency IBRD International Bank for Reconstruction and SPF State and Peace Building Fund Development S&P Standard & Poor’s IDA International Development Association TA Technical Assistance IDP Internally Displaced Persons TF Trust Fund IFAD International Fund for Agricultural Development TFSCB Trust Fund for Statistical Capacity Building IFC International Finance Corporation TSA Targeted Social Assistance IMF International Monetary Fund UNDP United Nations Development Program IPSAS International Public Sector Accounting Standards UNICEF United Nations Children’s Fund JICA Japan International Cooperation Agency USAID United States Agency for International JSDF Japanese Social Development Fund Development The World Bank Group Team IBRD/IDA IFC Vice President Philippe H. Le Houerou Vice President Rashad Kaldany Country Director Asad Alam Country Director Nena Stoiljkovic Team Leader Elene Imnadze, Team Leader Hester Marie DeCasper Sophie Devnosadze Thomas Lubeck TABLE OF CONTENTS I. Introduction................................................................................................................................ 2 II. Relevance of the CPS .............................................................................................................. 3 III. Progress toward achieving CPS objectives and outcomes ................................................ 6 IV. Proposed modifications to the CPS ....................................................................................... 9 V. Risks ......................................................................................................................................... 12 Tables and Figures Table 1: Selected Economic Indicators, 2007-2013...................................................................... 4 Table 2: Georgia – Planned vs. Actual Lending.......................................................................... 10 Table 3: List of Active Trust Fund Operations............................................................................. 11 Figure 1: How Key Bank Group Activities Fit Into the Two Pillars......................................... 11 Annexes Annex 1: Georgia: FY10-13 CPS Results Matrix....................................................................... 13 Annex 2: Standard CPS Annexes.................................................................................................... 21 1 GEORGIA COUNTRY PARTNERSHIP STRATEGY PROGRESS REPORT I. Introduction 1. This Progress Report assesses the implementation of the World Bank Group’s Country Partnership Strategy (CPS) for Georgia for FY10-13. Prepared against the backdrop of the twin crises of the August 2008 conflict and the global economic downturn, the CPS was built around two pillars: (i) meeting post-conflict and vulnerability needs, and (ii) strengthening competitiveness for post-crisis recovery and growth. The CPS envisaged total IDA/IBRD allocation of $396 million of which $130 million was from IDA and $266 million was the indicative IBRD lending. IFC commitments were projected at $210-360 million. 2. Significant progress has been made towards achieving CPS milestones and outcomes. Many of the indicators under both of the pillars have already been met or are well on track to be met. The Results Matrix presented in Annex 1 reflects progress to date as well as updated performance indicators and targets for the end of the CPS period. 3. These significant results have been achieved on the basis of rapid and suc- cessful implementation of the Bank Group program. Most of the IDA and IBRD funds envisaged under the CPS have already been committed and disbursed, partly on account of frontloading to support anti-crisis needs. About $385 million in new commitments have already been made ($290 million in FY10, and $95 million in FY11). Total disbursements over FY10-11 (up to February, 2011) amounted to about $376.5 million, of which about one third was in development policy flows. The disbursement ratio at end-FY10 was over 100 percent. IFC has so far made investments of about $41 million in risk management products, and loans for SME and trade finance. IFC has also provided a wide range of ad- visory services both within and outside the financial sector as well as advised the Georgian Government on simplifying tax policies and procedures for SMEs and on structuring a public-private partnership in roads. 4. The strategic focus of the CPS on the two pillars remains relevant for the country. This is predicated on the still fragile economic recovery, the continued economic and social vulnerabilities, and the need to further strengthen the foundations for medium- term competitiveness and growth. This Progress Report also maintains the principle of se- lectivity that underpinned the CPS. 5. The modifications proposed to the CPS are in terms of a greater concentra- tion of program activities at the intersection of the two pillars and additional financing from IDA and IBRD for FY12-13. The CPS lays out the plan for additional program in- terventions over the next two years which would serve to simultaneously address economic and social vulnerabilities while also supporting recovery and medium-term growth. These are to be financed through additional resources from the World Bank Group. This includes the continued access by Georgia to IDA-16 at the same levels as for IDA-15 (about $240 million for 3 years, which implies $160 million for the remaining two years of this CPS) and additional IBRD commitments of $75 million. IFC envisages a lower than expected implementation of the original CPS targets for new investment commitments because of 2 programmatic and commercial reasons. These include IFC’s existing high level of commit- ments in the main private sector banks, reduced market capacity in the wake of the crisis, slow post-crisis recovery in sectors such as agribusiness and infrastructure, and a sharp contraction in Foreign Direct Investment (FDI) in the wake of the crisis, which have sig- nificantly reduced the number of project finance opportunities for IFC outside the financial sector. II. Relevance of the CPS 6. The CPS strategic areas of engagement remain relevant to Georgia in the light of the fragile economic recovery and downside risks, and to address the exist- ing development challenges. Continued attention to addressing vulnerability needs and building a robust foundation for post-crisis competitiveness and sustainable growth remain central to Georgia’s development prospects. The economic recovery is fragile 7. Economic activity is picking up although the recovery remains fragile. After a decline of 3.8 percent in 2009, growth is now estimated at 6.3 percent for 2010, largely driven by a recovery in aggregate demand from exports and public investments (see Table 1). This has prompted a supply response, primarily in manufacturing, transport services (reflecting intensification of trade and transit flows), and tourism-related services, and has been aided by an increase in commercial bank lending by almost 24 percent in 2010. The global economic recovery has stimulated demand for Georgian exports and led to terms of trade gains. There is, however, significant uncertainty regarding the pace of recovery and growth, given the global economic situation. FDI remains far below pre-crisis levels and is estimated at only about $600 million for 2010 compared with $1.7 billion in 2007. Non- performing loans1 (NPLs) at 5.4 percent are now lower than the 2009 peak of 8.6 percent but still higher than pre-crisis levels of 3.4 percent. While inflation had fallen to 3 percent in 2009, it has begun to rise, primarily on account of higher international food and energy prices, and is projected at about 8 percent in 2011. 8. The tighter global economic and financing situation has forced significant ad- justment of the external account. The current account deficit has improved from 22.7 percent of GDP in 2008 to an estimated 11.3 percent in 2010 and a projected 10 percent in 2011. This has been supported by a real exchange rate depreciation of over 15 percent in 2008-2010. The trade balance has improved by about 10 percent of GDP over 2008-2010. Donor inflows have substituted, in part, for the decline in foreign private capital inflows and eased the external adjustment cost. 9. In the wake of the current recovery, the authorities are unwinding their fiscal stimulus and implementing a medium-term program of fiscal adjustment. The overall fiscal deficit has been reduced from 9.2 percent of GDP in 2009 to 6.6 percent of GDP in 2010 and to a budgeted 3.9 percent of GDP in 2011. Most of the adjustment is in current expenditures, but capital expenditures are also now projected to fall from 8.9 percent of GDP in 2010 to 7.6 percent in 2011. Despite growth in external obligations to finance countercyclical policies, public debt levels are sustainable. Public external debt and debt 1. Using the IMF’s definition 3 service are projected to peak in 2013 at 35.3 percent of GDP and 20.1 percent of exports of goods and nonfactor services, respectively. However, they are both projected to stay within the relevant prudential thresholds. Table 1: Selected Economic Indicators, 2007-2013 10. Georgia faces economic risks in common with other small open economies. First, a slower-than-anticipated global recovery would negatively impact exports, remit- tances, and FDI, and undermine domestic growth. Second, the crisis has led to a build-up in public debt which limits the fiscal space to respond to unanticipated shocks, and poses a challenge for debt management. However, the spike in debt service is expected to be fi- nanced through new market borrowing, use of foreign exchange and budget reserves, and a follow-on IMF program. Third, the recent global food price inflation challenges macroeco- nomic management as the authorities seek a proper balance between curbing inflation and supporting a fragile economic recovery. Social vulnerabilities remain significant 11. One in four Georgian remains poor. The economic downturn has put down- ward pressure on household incomes. The overall poverty rate increased from an estimated 22.7 percent in 2008 to 24.7 percent in 2009. The gap between urban and rural areas has widened. Rural poverty increased by nearly 3 percentage points between 2008 and 2009, 4 compared to a corresponding increase in urban poverty of about 1 percentage point. Pov- erty simulations suggest that poverty rates would have been even higher in the absence of the scaling up of the social safety net. Inequality remains significant with a Gini of 0.40 in 2009 as compared to 0.39 in 2007. Unemployment rates are at around 17 percent. Rates are reportedly higher among the youth, as well as in the city of Tbilisi. Unemployment would have risen even more without the anti-crisis measures implemented by the Government and supported by the donors. Progress on MDGs had been strong entering the crisis; continued attention is needed to protect and build upon the gains during the post-crisis recovery (see Annex). The continued high level of private expenditures on health services limits the poor’s ability to access basic health care despite the doubling of budget expenditures on the medical insurance program for the poor. Large numbers of internally displaced persons (IDPs) continue to face economic and social deprivation. The first phase of the Govern- ment response following the August 2008 conflict focused on essential housing and basic social services for 30,000 new IDPs. But there is still an unmet need to address housing for many of the IDPs from the 1990s. There is also the bigger challenge in terms of improving employment opportunities and livelihoods for all IDPs. Rising food and energy prices are putting additional pressures on household incomes, particularly for the poor and vulnerable. Medium term challenges for competitiveness and growth are substantial 12. The development agenda laid out in the CPS remains relevant. Georgia has continued to make strong progress on the structural reform agenda and maintained its high overall rank of 12 (out of 183) on the Doing Business 2011 indicators. The Government also achieved significant strides in improving infrastructure (especially roads and power), though Georgia does not yet fully benefit from its location as a transit country and its poten- tial in generating and exporting power across the region. While the banking sector has with- stood the financial crisis well, challenges remain. Banks face continued credit and funding risks, resulting from high dollarization levels of loans and deposits, dependence on external borrowing, and non-performing loans. Addressing these challenges requires continued ef- forts at further strengthening banking regulation, supervision, and risk management as well as fostering local currency savings through new asset accumulation vehicles. 13. The Government has refocused efforts on new sources of growth, which in- clude tourism and agriculture, by launching new initiatives to attract private investors. Georgia has not yet fully tapped its potential to transform the rural economy through invest- ment in agriculture supply chains for both export and domestic markets or in promoting sustainable tourism. There is also a renewed discussion on enhancing vocational and post- secondary education in order to provide the skills needed for a growing economy. 14. The interface between the citizens and the state is widely believed to be largely free of corruption. According to Transparency International’s Global Corruption Barom- eter (2010), only 3 percent of respondents who had contact with public services reported paying a bribe over the past 12 months, which is lower than the EU average. Moreover, 78 percent of respondents thought that corruption had decreased over the previous 3 years, the best result across the 86 countries surveyed. And more than three-quarters of those interviewed also believed that Government action had been effective in the fight against corruption. Georgia has made significant strides in moving up the ranks of the Corruption Perception Index-- from 124 in 2003 to 68 in 2010. 5 The CPS program remains relevant to support the Government’s priorities 15. The Government, recognizing these development challenges, has reconfirmed its medium-term priorities in the Basic Data and Directions document for 2011-2014 which highlights: • Addressing unemployment through restoring high economic growth path, develop- ing infrastructure, ensuring high quality education, and developing a more market- friendly business environment; • Achieving macroeconomic stability through a fiscal policy oriented towards bud- get deficit reduction and single digit inflation; • Increasing competitiveness through maintaining a free market environment, with openness to international trade, and establishing a deep and comprehensive free trade agreement with the EU; • Maintaining social assistance and health insurance as two pillars underpinning so- cial integration, and access to medical services and public health; • Supporting IDPs through provision of housing as well as social and economic inte- gration opportunities; • Developing agriculture through both farm and non-farm interventions, including further improving secondary and regional roads, investing in new technology and promoting new products and markets; • Revitalizing secondary cities and recreational areas to create additional centers of growth; • Strengthening global competitiveness and skills of Georgian youth through further developing a high quality education system. 16. To support the Government in its efforts to meet the above priorities, the CPS strategic pillars of addressing near term vulnerabilities and medium-term competi- tiveness and growth remain relevant for the rest of the CPS period. III. Progress toward achieving CPS objectives and outcomes Results under the CPS have been strong…. 17. Key accomplishments of the CPS cut across both pillars and various sectoral interventions. Over 600 km of roads were rehabilitated, creating about 20,000 person- months of employment and providing improved public access to markets and social ser- vices. Seven new schools were constructed, serving 4150 students (about half of whom are girls) and employing more than 300 teachers. Over 1800 health specialists were trained in family medicine, of which 95 percent are women. A 25-bed hospital was constructed in a mountainous area and a primary health care center was opened in Gori serving about 69,000 beneficiaries (of which 10,000 are IDPs). The targeted social assistance (TSA) scheme was scaled up to cover 408,367 beneficiaries, of which about 56 percent are women. Improve- ments in the business environment have continued. The e-filing system was expanded for all tax payments; as a result, 75 percent of all declarations in 2010 were done electronically (compared with only 10 percent in 2009). A voluntary Corporate Governance Code has been adopted by the Association of Banks of Georgia. The regulatory burden for SMEs has 6 been further reduced by the establishment of a Public Service Center, simplified procedures for obtaining a variety of licenses, permits and certificates, and improved access to informa- tion. 18. Institutional reforms have also progressed. Public resource management is being strengthened through the adoption and phased implementation of a Public Finance Management Policy Reform Vision, gradual introduction of results-based budgeting (in three ministries in FY10, and a total of six ministries in FY11), strengthening of investment programming, and rollout of local government budget system throughout the country. The new financial audit methodology introduced by the Chamber of Control (CCG) in 2010 is a significant step forward consistent with international best practice (including INTOSAI auditing standards), and represents a good foundation for strengthened oversight and ac- countability over public expenditures. The TSA was further strengthened in 2010, both in terms of improving its targeting effectiveness and increasing adequacy (per capita alloca- tion was increased from GEL 12 to 24 per month for additional household members). The authorities have improved the risk management system in customs, and declarations going through physical inspections (red channel) have been reduced substantially. Road safety improvements are being undertaken in parallel with road improvements so that roads are not only faster but also safer. ...and are supported by concerted frontloading and high disbursements 19. Most of the financial flows envisaged under the CPS have already been com- mitted or disbursed. The CPS had sought to frontload financing to support the Govern- ment’s anti-crisis needs. As a result, about $290 million of new IDA and IBRD commit- ments were provided in FY10, and $95 million in FY11. However, well-planned execution of Bank financing (including use of retroactive financing) has led to one of the highest disbursement ratio in the Bank of over 100 percent at end-FY10. 20. IFC began the CPS period coming off a record level of commitments. At the start of FY09, out of the $224 million invested in Georgia, $190 million was in the financial sector. In the current CPS period, an additional $41 million were invested in the banking sector in risk management products, trade finance and credit lines for SMEs in order to support continued banking sector recovery. At the same time, IFC has intensified business development efforts in the real sector, agriculture and infrastructure, which will take addi- tional time to yield investment projects. Portfolio quality is good and is underpinned by the Government’s strong ownership 21. The Bank’s current portfolio comprises 10 investment projects of which all but one are rated satisfactory. The number of projects in the portfolio is projected to decline from the current 10 to 5 by the end of FY13 with a concomitant increase in aver- age loan size. There is only one problem project -- the Second East West Highway--due to environmental safeguards non-compliance by contractors, which is being addressed by the client. IFC’s portfolio (currently $320 million committed) is performing well, with the exception of one investment in the real estate/retail sector, which is in the process of being restructured. 7 22. There is also an ongoing effort to strengthen project implementation capac- ity by mainstreaming respective functions into government entities. New Bank-financed projects will be implemented through existing government structures. All financial flows are being processed through the Government’s Treasury Single Account. Electronic dis- bursements of Bank flows were instituted in 2010, making Georgia an early adopter of this new system. The Bank will continue to support the Government’s efforts to address current public financial management challenges. Within the scope of the IPSAS implementation plan, the modified cash-based public sector accounting standards were already piloted in eleven organizations in 2010. Continued progress in adoption of IPSAS by the whole pub- lic sector as well as full compliance with the new financial audit methodology by the CCG (as mentioned above) is anticipated. Knowledge services have underpinned investments and policy dialogue 23. Analytical and advisory services further contributed to program implemen- tation. The policy note on capital budgeting as well as analysis of expenditure efficiency under the programmatic public expenditure work is helping inform the policy dialogue on public financial management and fiscal consolidation. The ongoing programmatic poverty work provides useful analysis of poverty impacts of changing patterns of growth as well as of key social programs. The ongoing Rural Investment Climate Assessment (RICA) will contribute to understanding the constraints faced by the rural sector at the household, farm and non-farm levels. The RICA is expected to stimulate policy dialogue with the Govern- ment and inform design of proposed Bank interventions in the Kakheti region. 24. Trust Funds (TFs) are integrated with Bank strategy and support key institu- tional development and project implementation. Recent TFs provide support to Gov- ernment’s priorities by financing various activities such as improving infrastructure services for IDPs with EU co-financing, continued participation of Georgia in international assess- ments of student learning achievements, and strengthening of capital investment planning in Tbilisi City (see para. 31 and Table 3). 25. The IFC provided a wide range of advisory services. In the financial sector, these included corporate governance trainings and consultations as well as risk and portfo- lio management diagnostics to selected banks. Outside the financial sector, IFC launched a food safety advisory project with targeted seminars for food producers. IFC is also advising the Government on simplifying tax policies and procedures for SMEs and on structuring a public-private partnership in roads. IFC completed its Corporate Governance project, which worked with the private sector and the Government to strengthen the legal framework for corporate governance and pilot best practices among private firms. The Business Enabling Environment Project completed by IFC in FY10 contributed to reduced regulatory burden for SMEs. To support economic diversification, employment and exports, IFC undertook a manufacturing sector competitiveness study in order to advise the Government on the most promising sectors for growth. 8 …and is complemented by better public outreach and closer partnership with EU and other donors 26. The World Bank Group has scaled up external communications, civil society outreach, and partnerships. The Bank has worked closely with the Government to sup- port communications through the conduct of various workshops and events on policy areas including business environment, health sector performance, regional development, agri- culture, higher education, social protection, and road safety. The Bank has also instituted regular consultations with civil society groups including academic institutions. At the same time, donor coordination continues in the context of the Progress Reports on the Joint Needs Assessment as well as through a broad range of Bank activities such as on roads, health, public financial management, IDPs, agriculture, and poverty analysis. Several donors in- cluding the Dutch Government, EU and SIDA actively co-finance Bank-financed projects while many other projects have parallel donor financing. The Bank team is constantly en- gaged in leveraging donor flows. The Bank also continues providing fee-based services to the Millennium Challenge Corporation in supervising the regional infrastructure develop- ment project. IV. Proposed modifications to the CPS Client’s demand for additional support is high; the augmentation of financial resources will help support Georgia’s recovery 27. The CPSPR envisages additional lending of about $235 million over FY12-13. This is expected to come from both IDA and IBRD sources. Georgia’s total IDA resource envelope for FY12-13 is projected at $160 million. These amounts are indicative only and assume the same level of overall IDA resources during the IDA16 period (FY12-14) as in the IDA15 period (FY09-11). Actual allocations in these years will depend upon: (i) total IDA resources available, (ii) Georgia’s performance rating; (iii) the performance and assis- tance terms of other IDA borrowers, (iv) the terms of IDA’s assistance to Georgia, and (v) the number of IDA-eligible countries. As IDA allocations are made in SDRs, allocations in equivalent US dollars are dependent upon the prevailing exchange rate and may change. 28. Additional IBRD lending commitments during FY12-13 are projected at $75 million. The actual delivery of additional resources would depend on Georgia’s perfor- mance, IBRD’s lending capacity, demand from other borrowers, and global economic de- velopments. The authorities have expressed demand for additional IBRD resources be- cause of their development needs and track record of effective use of long-term finance. As economic recovery takes hold, there will be a stronger concentration of Bank inter- ventions at the intersection of the two pillars 29. New Bank programs would support both pillars of the CPS (see Table 2 and Figure 1). The Bank will continue with an annual DPO series that would support further improvements in social safety nets, fiscal efficiency, and competitiveness. Investments in secondary and local roads will be deepened to support domestic connectivity and access to markets and public services, especially in rural areas. These would also help to create short- term jobs and support the economic recovery. The regional development program (to be 9 developed jointly with IFC) – which will be piloted in the Kakheti region - will build upon a diagnostic of institutional quality (especially the delivery of public services), infrastruc- tural adequacy (especially transport links with Tbilisi and trade logistics), and the potential for targeted interventions to foster growth in selected sectors. The design of the project – the blend of institutions, infrastructure, and interventions – will be informed both by this comprehensive diagnostic and by relevant international experience. All these programs as well as the analytical work (see below) would support both pillars of the CPS. Table 2: Georgia – Planned vs. Actual Lending CPS Lending Program CPS Progress Report Lending Program ( IDA and IBRD in US$ (IDA and IBRD in US$ million) million) o/w o/w FY 10 Plan FY 10 Actual Total IDA IBRD DPO 1 $85 DPO 1 $85 $85 E-W Highway I AF $23 E-W Highway I AF $28 $28 E-W Highway III $147 E-W Highway III $147 $147 Kakheti Roads $40 Kakheti Roads $30 $30 TOTAL FY10 $295 TOTAL FY10 $290 $85 $205 FY 11-13 Plan FY 11 Actual and Plan DPO 2/3 $45 DPO 2 Other Unallocated $56 Regional & Municipal Infra. $50 $40 $10 AF $45 $11.5 $33.5 Catastrophe Risk Insurance $5* $5 Facility $100 $56.5 $43.5 TOTAL FY11 FY12 Plan DPO 3 $40 $40 Secondary and Local Roads 2 $40 $40 Regional Development I $50 $50 TOTAL FY12 $130 $80 $50 FY13 Plan DPO (new series) $40 $40 Secondary and Rural Roads $30 $30 2 AF $50 $10 $40 Regional Development II $120 $80 $40 TOTAL FY13 TOTAL FY11-13 $101 $250 $160 $90 TOTAL FY12-13 Total Lending Total Lending FY10- $640 $301.5 $338.5 FY10-FY13 $396 FY13** * includes $3.5 million equivalent from regional IDA facility ** Actual values subject to changes in IDA-16 allocation and IBRD availability 10 Figure 1: How Key Bank Group Activities Fit Into the Two Pillars Vulnerability Competitiveness and Growth – Programmatic Poverty – Development Policy Operations – IFC advice on PPP in Energy Assessment – Secondary and Local Road Projects and Transport – Avian Flu Project – Municipal Development Project & TF – IFC Financial & Real Sector – Youth Project and – Ongoing Health & Education Projects Operations JSDF Grant – Public Expenditure Review – Broadband Competitiveness TF – IDP Community – Proposed Regional Development – South Caucasus Skills Study Development Project and projects – Sources of Growth Analysis SPF grant – Financial Sector Advisory – Capital Investment IDF 30. The IFC will continue to seek investments in the real sectors and mainly sup- port the second pillar. The sectors with the highest potential development impact and op- portunities for IFC include hydropower, agriculture and infrastructure. IFC is also focused on successful implementation of its advisory programs in corporate governance and risk and portfolio management diagnostics for banks, food safety, tax simplification for SMEs and public-private partnerships in the roads sector. 31. An active program of 11 Trust Fund operations for about $21.7 million (see Table 3) is cofinancing ongoing projects as well as providing sector diagnosis and strategies that underpin the Bank’s dialogue and possible interventions. Table 3: List of Active Trust Fund Operations Amount Amount TF Approved Undis- Approv- Clos- Project program (US$ bursed al FY ing FY /Donor mln.) (US$ mln.) Rural Development PHRD $4.50 $2.89 2005 2011 Avian Influenza Control & Human Pan- PHRD $1.40 $0.59 2007 2011 demic Preparedness & Response Education System Realignment & PHRD $4.95 $1.20 2007 2012 Strengthening Youth Development and Inclusion JSDF $1.22 $0.66 2008 2012 IDP Community Development SPF $2.21 $1.84 2009 2014 Tbilisi City Development Strategy CA $0.27 $0.17 2009 2012 Education System Realignment & Multiple $0.26 $0.06 2010 2011 Strengthening Second Development Policy Operation Dutch $2.66 - 2011 2011 (DPO 2) TF Regional & Municipal Infrastructure EU TF $3.71 $2.63 2011 2011 Development Tbilisi City Capital Investment Plan- IDF $0.35 $0.35 2011 2013 ning & Budgeting Preparation for 2013 National Popula- TFSCB $0.25 $0.25 2011 2013 tion Census Total $21.7 $10.64 11 Analytical and advisory services will continue to underpin the CPS 32. Analytical and advisory services remain important, and will inform the de- sign of the Bank program. The program of analytical and advisory services comprises 5 key areas - sources of growth, expenditure efficiency, poverty and inequality analysis, skills, as well as IFC advisory services on banking and business climate issues. These cut across both CPS pillars. In particular, the Bank will invest more in sources of growth analy- sis with respect to regional competitiveness, agriculture, trade, power, and environment. Work is also being done -- in the context of the broader South Caucasus region-- to support trade integration. The recently launched regional broadband competitiveness program will provide a diagnosis of the potential for improved cross-border and regional internet con- nectivity with a special focus on exploring e-growth opportunities for SMEs. As part of its crosscutting fiscal work, the Bank in also looking at ways to improve sustainability of roads maintenance. The poverty and inequality analyses will focus on informing policy choices to maximize poverty reducing impacts of growth and social policies. The skills study, part of a South Caucasus regional work, will look at the role of labor markets, education and training, in enhancing market skills. The results from these analyses will promote the Bank’s policy dialogue, support public outreach and communications on key policy issues, provide inputs for policy notes for the Government after the 2013 elections, and inform overall Bank lending program design. In addition, the Bank is chronicling Georgia’s anti- corruption reforms, focusing on the ‘how to’ of the Government’s efforts in cleaning up public services, which may be useful for other countries and also chart the remaining chal- lenges for the country. V. Risks Overall risks have moderated, though they remain significant 33. Overall country economic risks have evolved during the CPS period. In 2009, the CPS had highlighted risks from renewed regional conflict, enhanced domestic politi- cal tensions, a prolonged global economic crisis, and natural disasters. Over the past two years, there has been no resurgence of regional conflict and efforts are continuing to find a final resolution. Domestic political tensions are perceived to have abated (and are reflected in the conduct of local elections in 2010, including those for the Mayor of Tbilisi), though they may escalate in the run-up to the parliamentary elections in 2012. Rising food and utility prices also risk increasing social pressures. The ongoing recovery in global demand is helping Georgia recover. While the downside risks to a sustained and robust economic recovery are obviously significant, recent trends provide for some optimism. The ongoing IMF program is on track and the foreign exchange position is healthier than at the time of the CPS. Domestic investor confidence may also be returning as banks ease credit con- straints. Georgia’s debt burden indicators remain within relevant prudential thresholds but the fiscal space to respond to new, unanticipated shocks is more limited now. Georgia also remains vulnerable to natural disasters. The proposed Catastrophe Risk Insurance Facility would provide a new financial instrument for households, farms, and firms to obtain some financial protection from losses caused by climate change and geological hazards. 12 Annex Annex 1: 1: Georgia: Georgia: FY10-13 FY10-13 CPSCPS Results Matrix Results Matrix 
 CPS OBJECTIVE 1: MEETING POST-CONFLICT AND VULNERABILIY NEEDS Key Government Goals • Maintain macro and fiscal stability. Promote growth in 2010 and beyond (to be monitored in growth rates, inflation rates, public external debt) • Increase bank lending and build a strengthened banking and supervision system, capable of supporting private sector growth (to be monitored in increase in bank lending, level of NPLs) • Create and maintain jobs (to be monitored in the overall unemployment rate) • Enhance learning outcomes (to be monitored by TIMSS and PIRLS) • Increase social support and services, including social safety nets, health and IDP support (to be measured in poverty levels) Key Issues and Obstacles: • Contraction of external trade, remittances and capital inflows is reducing growth and fiscal space • The August conflict and impact of the fall in GDP growth may lead to a rise in the poor • Public administration, expenditure management, and procurement practices in need of improvement • Lower growth is reducing job creation in the private sector and leading to rising unemployment • Financial intermediation impacted and may be inadequate to maintain vibrant private sector. 13 • As health care is privatized, access to affordable care needs to be ensured and services improved • The targeted poverty benefit, which is operating well, needs to be expanded to cover more of the poor • Progress in improving general education needs to be maintained through further expanding curricula reform, more teacher training, upgrading primary and secondary schools poor physical infrastructure as this limits learning outcomes • Local infrastructure (water, roads, etc) needs sustainable improvement. CPS RESULT AREAS, OUTCOMES REVISED CPS RESULT PROGRESS TO DATE WORLD BANK GROUP AND TARGETS AREAS, OUTCOMES AND PROGRAM AND TARGETS PARTNERS Results Area 1: Preserve Economic Stability and Create Jobs Outcome 1: Improved public resource management -- Primary Indicator (original): Fiscal --Primary Indicator (revised): Milestone Met: Gradual reduction in the fiscal Ongoing lending: Public Sector deficit is managed in a non-inflationary Fiscal deficit is managed in a deficit has been achieved while maintaining Fin. Management, Regional and way, while maintaining support for key non-inflationary way, while support for key social services. World Bank Municipal Development, DPO social services (2009 baseline: fiscal maintaining support for key staff estimates fiscal deficit at 6.6 for 2010. Series on fiscal and budget deficit = 9 percent. Target = gradual social services (2009 baseline: Share of social sector expenditures in 2010 policies 13 11 • The targeted poverty benefit, which is operating well, needs to be expanded to cover more of the poor • Progress in improving general education needs to be maintained through further expanding curricula reform, more teacher training, upgrading primary and secondary schools poor physical infrastructure as this limits learning outcomes • Local infrastructure (water, roads, etc) needs sustainable improvement. CPS RESULT AREAS, OUTCOMES REVISED CPS RESULT PROGRESS TO DATE WORLD BANK GROUP AND TARGETS AREAS, OUTCOMES AND PROGRAM AND TARGETS PARTNERS reduction consistent with fiscal fiscal deficit = 9 percent. Target state budget remained 36 percent. Approved sustainability). Results Area Share of social services 1: Preserve Economic in = gradual reduction consistent state budget 2011 suggests 38.2 percent. AAA: Country Economic state budget was 36 percent in 2009. with fiscal sustainability). Share Memorandum on increasing Stability and Create Jobs Target = no decrease in real terms). of social sector expenditure in Public Finances Management Reform Policy growth. Public expenditure state budget was 36 percent in Vision was adopted. review. Follow up on PEFA, Outcome 1: Improved public resource 2009. Target = no decrease in CPA, AA ROSC management share of social sector expenditures in state budget). Key international partners: -- Primary Indicator (original): Fiscal --Primary Indicator (revised): Milestone Met: Gradual reduction in the fiscal Ongoing IMF, lending: EU, ADB,Public Sector Sweden, -- Primary deficit Indicatory is managed (original): in a non-inflationary -- Primary Fiscal Indicatory deficit (revised) is managed in a: Milestone deficit has been Results-budgets Met: achieved of three while maintaining Netherlands Fin. Management, Regional and Introduction of performance based Introduction non-inflationary results-based of way, while spending units support for key(Ministry of Justice, social services. Ministry World Bankof Municipal Development, DPO way, while maintaining support for key budgeting (Baseline = none. Target = 5 budgeting Education Science, Ministry social services (2009 baseline: fiscal support = maintaining (Baseline for none. key and fiscal staff estimates deficit at 6.6 of 2010. forHealth, Series on fiscal and budget ministries) Target = all ministries) Labor and Social Protection) were incorporated deficit = 9 percent. Target = gradual social services (2009 baseline: Share of social sector expenditures in 2010 policies as an information annex in the 2010 Annual Budget Law; and extended to six spending units for 2011 Annual Budget Law 11 (information annex), with improvements in quality. -- Primary Indicator: Establishment and rollout of local government budget Outcome Target Met: The Budgetary and system (Baseline = none. Target = 69 Financial Management System for the LGUs use this) Municipalities and Ministry of Finance was developed and installed with staff trained in all municipalities. Outcome 2: Improved performance of key financial institutions -- Primary Indicator (original): Financial -- Primary Indicator (revised): Ongoing lending: Rural health and lending levels of systemic Financial health of and lending Milestone Met: IFC’s portfolio in the banking Development banks supported by IFC (various banking levels by Georgian commercial sector (currently $248 million committed in 3 indicators including lending levels and banks improved as measured by banks) is performing well. These clients AAA: Financial Sector NPLs) following indicators (baselines represent 70 percent of commercial banks’ total Advisory, Payment System TA, are as of September 2009): assets. Clients are in compliance with almost FIRST grant to strengthen the Capital Adequacy Ratio – 20.2 all covenants. FSA Return on Assets – 1.4 Return on Equity – 7.2 IFC: Coordinated IFI effort to Level of NPL – 18.2 ensure bank capital and liquidity, Liquidity ratio – 44.7 trade and micro-finance lines of Loan to deposit ratio - 143 credit, providing advisory to individual banks on risk management and NPL workouts and other banking advisory products. 12 14 • The targeted poverty benefit, which is operating well, needs to be expanded to cover more of the poor • Progress in improving general education needs to be maintained through further expanding curricula reform, more teacher training, upgrading primary and secondary schools poor physical infrastructure as this limits learning outcomes • Local infrastructure (water, roads, etc) needs sustainable improvement. CPS RESULT AREAS, OUTCOMES REVISED CPS RESULT PROGRESS TO DATE WORLD BANK GROUP AND TARGETS AREAS, OUTCOMES AND PROGRAM AND TARGETS PARTNERS Results Area 1: Preserve Economic Key International Partners: IMF, EBRD, ADB, OPIC, FMO, Stability and Create Jobs KfW, DEG, ADB Outcome 3: Increased employment Outcome 1: Improved through Bank public resource financed projects management -- Primary Indicator: Number of new Ongoing lending: Regional and job-months -- Primary created in World Indicator Bank Group (original): Fiscal --Primary Indicator (revised): Milestone About 20,000Met: Gradual reduction man-months in the fiscal of labor were Ongoing Municipallending: Public Sector Development, financed deficit managed is projects (Baseline = 0. Target = in a non-inflationary Fiscal deficit is managed in a deficit under created has been Bank financed the achieved maintaining whileprojects after Secondary Fin. and Local Management, Roads, E- Regional and at least 30,000 man-months of labor) non-inflationary way, while the CPS approval support for key social of Q3 of CY2010. and as services. World Bank W Highways Municipal I, II, III, Kakheti Development, DPO way, while maintaining support for key social services (2009 baseline: fiscal maintaining support for key staff estimates fiscal deficit at 6.6 for 2010. Roads on fiscal and budget Series deficit = 9 percent. Target = gradual social services (2009 baseline: Share of social sector expenditures in 2010 policies New lending: Secondary and Local Roads 2, Regional Development 11 AAA: Labor market analysis in Poverty Assessment; impact of crisis on real sector IFC: New investments in the real sectors, competitiveness study. Support to SMEs Outcome 4: Improved quality of education -- Primary Indicator: Percentage of -- Primary Indicator: Percentage Ongoing lending: Education children learning according to the of children learning according to Original Outcome Target Met: 80% of APL II; grants on higher improved national curriculum (2006 the improved national children are learning according to the new education baseline = about 2 percent. Target = at curriculum (2006 baseline = national curriculum. least 75 percent by 2012) about 2 percent. Target = at least AAA: Education Sector 95 percent by 2012) Milestone largely met: The new national Review on skills and human curriculum has been instituted in all schools development across the country except for grade six. Key International Partners: The construction of all 7 schools was Japan, Denmark, Sweden, completed and 6 schools are already Netherlands, EU, USAID, operational. UNICEF Milestone met: Certification launched in 2010; 1.7% of teachers are certified. 13 15 • The targeted poverty benefit, which is operating well, needs to be expanded to cover more of the poor • Progress in improving general education needs to be maintained through further expanding curricula reform, more teacher training, upgrading primary and secondary schools poor physical infrastructure as this limits learning outcomes • Local infrastructure (water, roads, etc) needs sustainable improvement. CPS RESULT AREAS, OUTCOMES REVISED CPS RESULT PROGRESS TO DATE WORLD BANK GROUP AND TARGETS AREAS, OUTCOMES AND PROGRAM AND TARGETS PARTNERS Results Area 2: Improve Social Services Results Area 1: Preserve Economic Stability and Create Jobs Outcome 1: Increased coverage and efficiency of TSA Outcome 1: Improved public resource management -- Primary Indicator: Percent of the -- Primary Indicator: Percent of As of 2010, 40 percent of bottom decile Ongoing lending: DPO series on extreme poor that receive poverty benefits the extreme poor that receive (extreme poor) received TSA. safety net -- Primary (original): Fiscal --Primary poverty Indicator benefits (revised): through TSA Milestone Met: Gradual reduction in the fiscal Ongoing lending: Public Sector through (2009 baseline TSA Indicator = 30 percent. Target deficit = managed isat least 50) in a non-inflationary Fiscal baseline (2009 deficit is= managed in a 38.9 percent. Milestone been Budget deficit has Met: achieved while maintaining allocation Fin. Management, to the TSA AAA: Regional and Poverty Assessment way, while maintaining support for key non-inflationary Target = at least 50)way, while support for increased about bykey social 27%services. World from 2008 2009 Municipal Development, DPO to Bank social services (2009 baseline: fiscal maintaining support for key reaching 160 mln staff estimates Lari. fiscal 2010 budget deficit for 2010. Key at 6.6 allocation on fiscal and SeriesInternational Partners: budget deficit = 9 percent. Target = gradual social services (2009 baseline: was mln. sector of social Share 162 (28.6% increase Lari expenditures as UN, in 2010 Netherlands policies compared to 2008). Milestone Met: The monitoring Survey was completed 11 by end-2009. Milestone Met: Targeting mechanisms are being adjusted by: (a) adjusting the proxy- means testing formula; (b) improving business processes related to TSA administration; (c) implementing a public information campaign; and (d) restarting recertification of TSA beneficiaries. Outcome 2: Wider health coverage facilitated through improved budgeting, infrastructure and information systems. -- Primary Indicator: Share of bottom -- Primary Indicator (revised): In 2010 about 30 percent of bottom 2 quintiles Ongoing lending: Health Sector two quintiles with access to subsidized Share of bottom two quintiles had access to subsidized health insurance. Development; DPO Series on health insurance (2007 baseline = 20 with access to subsidized health health care percent. Target = over 45 percent) insurance (2009 baseline = 27.6 Milestone Met: Construction of Ambrolauri 25 percent. Target = over 45 bed hospital and Gori PHC will be completed AAA: Poverty Assessment percent) by the end of December 2010. Milestone On Track: 884 doctors and 990 IFC: Possible investment in nurses have been trained in Family Medicine. private health facilities -- Primary Indicator: Health care service -- Primary Indicator: Health Health care service utilization by poor Key International Partners: utilization as measured by number of out- care service utilization by poor population increased to 2.47 percent in 2010. UN Agencies, Netherlands patient visits per capita (2009 baseline = population as measured by 1.8. Target = 2.3) number of out-patient visits per capita (2009 baseline=1.4 Target = 2.6) 16 14 • Progress in improving general education needs to be maintained through further expanding curricula reform, more teacher training, upgrading primary and secondary schools poor physical infrastructure as this limits learning outcomes • Local infrastructure (water, roads, etc) needs sustainable improvement. CPS RESULT AREAS, OUTCOMES REVISED CPS RESULT PROGRESS TO DATE WORLD BANK GROUP AND TARGETS AREAS, OUTCOMES AND PROGRAM AND TARGETS PARTNERS -- Primary Indicator: Better targeting of Phase I-II for the development of the integrated services Results through Area 1:the development Preserve of an Economic Social Information Management System effective health care information data (SIMS) at the Social Service Agency (SSA) has Stability and Create Jobs base been completed. Phase III is now underway. Outcome 1: Improved public resource management Outcome 3: Improved Municipal Services in Supported areas (water, local roads etc) -- Primary Indicator (original): Fiscal --Primary Indicator (revised): Milestone Met: Gradual reduction in the fiscal Ongoing lending: Public Sector deficit is managed in a non-inflationary Fiscal deficit is managed in a deficit has been achieved while maintaining Fin. Management, Regional and -- Primary way, whileIndicators maintaining support for key -- Primary Indicators non-inflationary way, while support KWh consumed social for key per 0.6 m3 =services. World Bank Ongoing Municipallending Development, and : Regional DPO - 20% reduction in KWh consumed per maintaining -average support in reduction key for KWh staff estimates fiscal deficit at 6.6 for 2010. Municipal Series on Development, fiscal and Cities budget social services (2009 baseline: fiscal Alliances annum deficit =due to introduction 9 percent. energy = gradual Target of consumed per (2009 social services m3 baseline: due to Share of social sector expenditures in 2010 policies Grant for Tbilisi efficient water production methods introduction of energy efficient Milestone Met: 49 water, wastewater and water production methods (2008 roads subprojects have been implemented New lending: Regional - 3-6 hours increase in piped water baseline = 0.7. Target = 0.4) throughout Georgia in 22 Local Self Development service per day 11 - average increased # of hours Governments. - 30% reduction in trip time/vehicle costs AAA: Municipal services due to improved urban roads per day of piped water service (2008 baseline = 7 h. Target = Key International Partners: 12 h.) ADB, EBRD, MCC, KfW, GTZ, -average reduction in trip time UNDP due to improved secondary roads (2008 baseline = 100%. Target = 70%) Outcome 4: Improved IDP housing and welfare Outcome Target Met: About 3,600 IDPs Ongoing lending: Regional and -- Primary Indicator: Number of -- Primary Indicator: Broader have benefited from the construction of 783 Municipal Development, IDP beneficiaries from completed post- support to IDPs: expand houses. Peace-Building Grant conflict rehabilitation/construction (2008 infrastructure and improve living baseline = 0 target = 3,600 by end-2009) conditions (2009 baseline = 0. Improvement of IDP housing conditions, water AAA: Poverty Assessment Target = 3500 IDPs) supply, drainage, pedestrian crossing and solid- -- Primary Indicator: Impact on broader waste collection and disposal are currently Key International Partners: support to IDPs beyond housing, e.g. underway and will be finalized by end June UN, USAID, KfW, EC electricity, water, sewage, community 2011. development (2009 baseline = 0) 15 17 CPS Objective 2: Strengthening Competitiveness for Post-Crisis Growth Key Government Goals • Strengthen Georgia’s role as a regional transport corridor and improve connectivity within Georgia (to be measured by increased transit traffic) • Continue to deepen Georgia’s private sector friendly environment for higher business growth (to be measured by the level of growth of foreign investment, SMEs). • Build a more efficient and productive rural sector. (to be measured by increase in agriculture exports, farm income) • Establish greater energy security and efficiency (to be measured by amount of energy produced and exported) Key Issues and Obstacles: • Transport: E-W corridor needs improvement. Black sea ports need modernization. Road safety needs improvement • Tremendous progress achieved in the business environment to be sustained through further strengthening of several areas (tax, customs) • The financing system remains shallow. SMEs have limited credit access and households to mortgages • Energy: Increased potential for hydropower needs to be developed • Households, businesses and farmers need improved mechanisms to cope with natural disasters • Agriculture – need to improve agriculture productivity, food certification and processing, irrigation framework, crop and livestock disease risk 2013 CPS RESULT AREAS, MILESTONES PROGRESS TO DATE WORLD BANK GROUP OUTCOMES, AND TARGETS PROGRAM AND PARTNERS Results Area 3: Upgrade Transport Corridor and Increase Connectivity Outcome 1: Transport time and costs reduced along key transport routes Primary Indicator: Transit time and Primary Indicator: Transit time Outcome Targets Met: Transit time on Telavi Ongoing lending: E-W vehicle operating costs along various and vehicle operating costs section was reduced from 120 to 55 minutes as Highway Improvement I, II, III; supported segments improved by over along various supported targeted. Secondary and Local Roads; 25%: segments improved by over Infrastructure Pre-Investment (Transit time to Rikoti and to Telavi 25%: Transit time on Agaiani – Igoeti section Facility; Kakheti Roads – baseline and targets to be (Transit time to Telavi – reduced to 6.7 minutes, and on Igoeti to Sveneti determined in new projects) baseline=120. Target=55 – section to 12 minutes but the opposite direction New lending: Secondary and (Transit time from Agaiani to Igoeti in minutes) is still partly under construction. Local Roads 2 2006 baseline = 10. Target = 7 – in (Transit time from Agaiani minutes) to Igoeti 2006 baseline = 10. AAA : capacity building to (Transit time from Igoeti to Sveneti Target = 7 – in minutes) Milestone Met: Over 500 km of roads have Roads Dept.; donor coordination 2007 baseline = 19. Target = 12 - in (Transit time from Igoeti to already been rehabilitated and/or widened. 18 16 • Households, businesses and farmers need improved mechanisms to cope with natural disasters • Agriculture – need to improve agriculture productivity, food certification and processing, irrigation framework, crop and livestock disease risk 2013 CPS RESULT AREAS, MILESTONES PROGRESS TO DATE WORLD BANK GROUP OUTCOMES, AND TARGETS PROGRAM AND PARTNERS minutes) Sveneti 2007 baseline = 19. Milestone Met: Rikoti Tunnel rehabilitation is IFC: Exploring direct Results Area 3: Upgrade Transport Target = 12 - in minutes) underway. investments and PPP support in Corridor and Increase Connectivity transport and logistics. Outcome 2: Improved road safety Milestone Met: National Road Safety Strategy Key International Partners: 1: Transport Outcome Indicator Primary : # oftime and costs fatalities per and the Action Plan adopted by the ADB, JICA, MCC reduced 10,000 along cars key (2008 transport baseline routes = 13.9 target = Government. 12) Primary Indicator: Transit time and Primary Indicator: Transit time Outcome Targets Milestone Met: Transit Met: Hazardous timealong spots on Telavi E60 Ongoing lending: E-W vehicle operating costs along various and vehicle operating costs section was eliminated reduced from 80 infrom 2009120 to 45 to in minutes as 552010. Highway Improvement I, II, III; supported segments improved by over along various supported targeted. Secondary and Local Roads; 25%: segments improved by over Milestone on Track: Roads Dept. Safety Infrastructure Pre-Investment (Transit time to Rikoti and to Telavi 25%: Division has five Transit time on staff Agaiani members. One training – Igoeti section Facility; Kakheti Roads (Transit time to Telavi – has been reduced to provided and 6.7 minutes, several and trainings on Igoeti are to Sveneti – baseline and targets to be underway. determined in new projects) baseline=120. Target=55 – section to 12 minutes but the opposite direction New lending: Secondary and - (Transit time from Agaiani to Igoeti in minutes) is still partly under construction. Local Roads 2 Results Area 4: Accelerate Business 2006 baseline = 10. Target = 7 – in (Transit time from Agaiani Growth minutes) to Igoeti 2006 baseline = 10. AAA : capacity building to (Transit Outcome 1: Sustained Igoeti to Sveneti time from improvement in Target = 7 – in minutes) Milestone Met: Over 500 km of roads have Roads Dept.; donor coordination 2007 environment Business baseline = 19. Target = 12 - in (Transit time from Igoeti to already been rehabilitated and/or widened. Outcome Indicator Met: 2011 Doing Ongoing lending: DPO - focus -- Primary Indicator: Selected business Business indicates: on tax, customs, trade promotion environment indicators including: - Paying Taxes rank = 61 16 -- “Paying Taxes” rank in Doing - # of days required to export = 10 AAA: advisory on trade Business (2009 baseline = 110. - # of days required to import = 13 Target = improvement in ranking) IFC: Ongoing SME lines of -- # of days required to import and Milestone Met: As part of a program to credit, leasing finance support, export from Doing Business (2009 streamline the tax payment system, MoF advisory on investment climate, baseline = 12 days to export, 14 Introduced an e-filing system covering all taxes Corporate Governance advisory days to import. Target = reduction and available to all taxpayers. by 10%) Key International Partners: Milestone Met: The risk management system EBRD, CIDA, BP, Netherlands introduced at customs, including yellow and red corridors for all declarations and green and blue corridors for firms on the Gold List. The system was further improved in 2010 by allowing access to all corridors for all customs declarations and reducing the number of declarations passing through the red corridor, which requires documentation and physical examination prior to the release of goods. 17 19 • The financing system remains shallow. SMEs have limited credit access and households to mortgages • Energy: Increased potential for hydropower needs to be developed • Households, businesses and farmers need improved mechanisms to cope with natural disasters • Agriculture – need to improve agriculture productivity, food certification and processing, irrigation framework, crop and livestock disease risk 2013 CPS RESULT AREAS, MILESTONES PROGRESS TO DATE WORLD BANK GROUP OUTCOMES, AND TARGETS PROGRAM AND PARTNERS - “Access to finance” rating in Updated BEEPS data not yet available. BEEPS Results Area(2008 baseline = 3: Upgrade 55% of Transport Corridor indicated firmsand a problem. Increase Target = Connectivity under 40%) -Primary Indicator: Global Outcome 1: Transport time and costs Competitiveness Index (2010 reduced along key transport routes baseline = rank 93, score 3.86. Target = improved rank and Primary Indicator: Transit time and Primary Indicator: Transit time score) Outcome Targets Met: Transit time on Telavi Ongoing lending: E-W vehicle operating costs along various and vehicle operating costs section was reduced from 120 to 55 minutes as Highway Improvement I, II, III; Outcome 2: Increased support to along various supported targeted. Secondary and Local Roads; supported segments improved by over Small and Medium Enterprises segments improved by over Infrastructure Pre-Investment 25%: Ongoing lending: DPO - focus (Transit -- Primary time to Rikoti Indicator: and to Portfolio SME ofTelavi 25%: Transit time on Agaiani – Igoeti section IFC’s portfolio bank clients provided over 5500 Facility; Kakheti Roads on food certification, Kakheti credits baseline byand – extended targets to IFC-supported be banks. (Transit time to Telavi – reduced MSME to 6.7 minutes, loans in 2009, and for Igoeti ontotal to Sveneti outstanding Roads; Rural Development, Target is to return determined in new pre-crisis (2007) toprojects) baseline=120. Target=55 – section 12 minutes MSME toportfolio ofbut the opposite $416 milliondirection as of New lending: Avian Secondary Influenza, Secondary and and level(Transit million. of $750 time from Agaiani to Igoeti in minutes) December is 2009. still partly under construction. Local Roads. Roads 2 2006 baseline = 10. Target = 7 – in (Transit time from Agaiani minutes) to Igoeti 2006 baseline = 10. New AAAlending: Regional : capacity building to Outcome 3: Improved agriculture Target = 7 – in minutes) Milestone Met: Over 500 km of roads have Development Roads Dept.; donor coordination (Transit time from Igoeti to Sveneti production, testing, and sales 2007 baseline = 19. Target = 12 - in (Transit time from Igoeti to already been rehabilitated and/or widened. AAA: Note on rural --Primary Indicator: Sales of enterprises Support has been provided to three supply development in Georgia; further supported by rural development project chains (wine, citrus and hazelnuts), including work on rural investment climate (2008 baseline = 20 enterprises technical 16 assistance and demonstrations for supported. Target = double # of supported improved agricultural practices. IFC: Explore investments in enterprises) agri-business, advisory on Milestone No Longer Applicable: product competitiveness, food Government did not approve approach that safety standards envisages support to supply chain grants. Key International Partners: Milestone Met: Subsidiary loan agreements EBRD, IFAD, EU, Netherlands have been signed with micro finance institutions, which provided over 7,000 micro loans amounting to more than $7.5 million. -- Primary Indicator: Increased use of -- Primary Indicator: Increased food certification to boost agriculture exports of agriculture produce Milestone Met: Ministry of Agriculture exports. (2009 baseline=$286 million). laboratory rehabilitated and equipment installed. Milestone Met: More than 50% of food producers have implemented food safety or quality management systems. 18 20 Annex 2: Standard CPS Annexes   21 Georgia at a glance 3/9/11 
 E uro pe
& L o wer K e y  D e v e l o p m e n t   In d i c a t o r s 
 C entral m iddle G eo rgia A s ia inc o m e Age distribution, 2008 (2009) Male Female P o pulatio n,
m id‐year
(m illio ns ) 4.4 403 3,767 75-79 S urfac e
area
(tho us and
s q.
k m ) 70 23,549 31,923 60-64 P o pulatio n
gro wth
(%) 0.1 0.3 1.2 Urban
po pulatio n
(%
o f
to tal
po pulatio n) 53 64 40 45-49 30-34 G N I
(A tlas 
m etho d,
US $ 
billio ns ) 11.1 2,770 7,709 15-19 G N I
per
c apita
(A tlas 
m etho d,
US $ ) 2,540 6,876 2,046 G N I
per
c apita
(P P P ,
internatio nal
$ ) 4,700 13,271 4,481 0-4 6 4 2 0 2 4 6 G D P 
gro wth
(%) ‐3.8 4.1 7.5 percent of total population G D P 
per
c apita
gro wth
(%) ‐3.8 3.7 6.3 ( m o s t   r e c e n t   e s t i m a t e ,  2 0 0 3 – 2 0 0 9 ) P o v erty
headc o unt
ratio 
at
$ 1.25
a
day
(P P P ,
%) 13 4 .. P o v erty
headc o unt
ratio 
at
$ 2.00
a
day
(P P P ,
%) 30 9 .. Under-5 mortality rate (per 1,000) L ife
expec tanc y
at
birth
(years ) 71 69 68 Infant
m o rtality
(per
1,000
liv e
births ) 39 20 44 60 C hild
m alnutritio n
(%
o f
c hildren
under
5) .. .. 25 50 40 A dult
literac y,
m ale
(%
o f
ages 
15
and
o lder) 100 99 87 A dult
literac y,
fem ale
(%
o f
ages 
15
and
o lder) 100 97 73 30 G ro s s 
prim ary
enro llm ent,
m ale
(%
o f
age
gro up) 100 100 109 20 G ro s s 
prim ary
enro llm ent,
fem ale
(%
o f
age
gro up) 98 98 105 10 A c c es s 
to 
an
im pro v ed
water
s o urc e
(%
o f
po pulatio n) 99 95 86 0 A c c es s 
to 
im pro v ed
s anitatio n
fac ilities 
(%
o f
po pulatio n) 93 89 50 1990 1995 2000 2007 Georgia Europe & Central Asia a N e t   A i d   F l o ws 1980 1990 2000 2009 (US $  m illio ns ) N et
O D A 
and
o ffic ial
aid .. 0 169 888 Growth of GDP and GDP per capita (%) T o p 3 do no rs  (in 20 0 8): 


United
S tates .. 0 75 402 20 


E uro pean
C o m m is s io n .. 0 14 113 10 


G erm any .. 0 19 71 0 -10 A id
(%
o f
G N I) .. 0 .0 5.3 7.0 -20 A id
per
c apita
(US $ ) .. 0 38 203 -30 -40 L o n g ‐ T e rm  E c o n o m ic  T re n d s -50 95 05 C o ns um er
pric es 
(annual
%
c hange) .. 3.3 4.1 1.7 G D P 
im plic it
deflato r
(annual
%
c hange) 1.0 22.4 4.7 ‐2.0 GDP GDP per capita E xc hange
rate
(annual
av erage,
lo c al
per
US $ ) .. 0.0 2.0 1.7 T erm s 
o f
trade
index
(2000
=
100) .. .. 100 94 1980–90 1 990–2000 2000–09       (av erage annual gro wth %) P o pulatio n,
m id‐year
(m illio ns ) 5.1 5.5 4.4 4.4 0.7 ‐2.1 ‐0.1 G D P 
(US $ 
m illio ns ) .. 7,738 3,057 10,767 0.4 ‐7.1 7.4   (% o f G D P ) A gric ulture 24.3 31.5 21.9 9.4 .. .. 0.5 Indus try 35.6 33.5 22.4 21.9 .. .. 10.0 


M anufac turing 27.9 24.2 9.1 11.5 .. .. 10.9 S erv ic es 40.1 35.0 55.7 68.8 .. .. 8.8 H o us eho ld
final
c o ns um ptio n
expenditure 55.8 64.8 90.5 81.6 .. 23.1 6.4 G eneral
go v 't
final
c o ns um ptio n
expenditure 13.0 10.2 8.5 24.5 .. 32.1 22.7 G ro s s 
c apital
fo rm atio n
 29.1 30.7 26.6 13.0 .. 21.0 3.0 E xpo rts 
o f
go o ds 
and
s erv ic es .. 39.9 23.0 29.7 .. 17.6 10.0 Im po rts 
o f
go o ds 
and
s erv ic es .. 45.7 39.7 48.9 .. 14.2 12.0 G ro s s 
s av ings .. .. 9.2 1.8 N o te:
F igures 
in
italic s 
are
fo r
years 
o ther
than
tho s e
s pec ified.
2009
data
are
prelim inary.

..
indic ates 
data
are
no t
av ailable. a.
A id
data
are
fo r
2008. D ev elo pm ent
E c o no m ic s ,
D ev elo pm ent
D ata
G ro up
(D E C D G ).   20 22 Georgia B a l a n c e   o f   P a ym e n t s   a n d   T r a d e 2000 2009 Governance indicators, 2000 and 2009 (US $  m illio ns ) T o tal
m erc handis e
expo rts 
(fo b) 459 1,894 T o tal
m erc handis e
im po rts 
(c if) 971 4,293 Voice and accountability N et
trade
in
go o ds 
and
s erv ic es ‐521 ‐2,059 Political stability C urrent
ac c o unt
balanc e ‐269 ‐1,210 


as 
a
%
o f
G D P ‐8.8 ‐11.2 Regulatory quality Wo rk ers '
rem ittanc es 
and Rule of law 


c o m pens atio n
o f
em plo yees 
(rec eipts ) 274 714 Control of corruption R es erv es ,
inc luding
go ld 109 2,111 0 25 50 75 100 2009 C e n tra l G o v e rn m e n t F in a n c e Country's percentile rank (0-100) 2000 higher values imply better ratings (% o f G D P ) C urrent
rev enue
(inc luding
grants ) 15.4 29.3 Source: Kaufmann-Kraay-Mastruzzi, World Bank 


T ax
rev enue 14.6 24.4 C urrent
expenditure 16.7 30.1 T e c h n o l o g y  a n d   In f r a s t r u c t u r e 2000 2008 O v erall
s urplus /defic it ‐1.7 ‐9.2 P av ed
ro ads 
(%
o f
to tal) 93.4 38.6 H ighes t
m arginal
tax
rate
(%) F ixed
line
and
m o bile
pho ne 


Indiv idual .. .. 


s ubs c ribers 
(per
100
peo ple) 15 78 


C o rpo rate .. .. H igh
tec hno lo gy
expo rts 


(%
o f
m anufac tured
expo rts ) 10.8 2.7 E x t e r n a l   D e b t   a n d   R e s o u r c e   F l o ws E n v iro n m e n t (US $  m illio ns ) T o tal
debt
o uts tanding
and
dis burs ed 1,638 6,254 A gric ultural
land
(%
o f
land
area) 43 36 T o tal
debt
s erv ic e 118 758 F o res t
area
(%
o f
land
area) 39.7 39.7 D ebt
relief
(H IP C ,
M D R I) – – T erres trial
pro tec ted
areas 
(%
o f
s urfac e
area) .. 3.9 T o tal
debt
(%
o f
G D P ) 53.6 58.1 F res hwater
res o urc es 
per
c apita
(c u.
m eters ) 12,558 13,497 T o tal
debt
s erv ic e
(%
o f
expo rts ) 12.5 23.6 F res hwater
withdrawal
(billio n
c ubic 
m eters ) .. 1.6 F o reign
direc t
inv es tm ent
(net
inflo ws ) 131 659 C O 2
em is s io ns 
per
c apita
(m t) 0.96 1.4 P o rtfo lio 
equity
(net
inflo ws ) 0 12 G D P 
per
unit
o f
energy
us e 


(2005
P P P 
$ 
per
k g
o f
o il
equiv alent) 3.9 5.8 Composition of total external debt, 2009 E nergy
us e
per
c apita
(k g
o f
o il
equiv alent) 604 767 Short-term, 844.9200985 IBRD, 100 IDA1,153  Wo rld  B a n k  G ro u p  p o rtf o lio 2000 2009  (US $  m illio ns ) IMF, 785 
IB R D Private, 


T o tal
debt
o uts tanding
and
dis burs ed 0 100 2528.736325 Other multi- 


D is burs em ents – 0 lateral, 183.1739015 


P rinc ipal
repaym ents – 0 Bilateral, 659 


Interes t
paym ents – 2 US$ millions 
ID A 


T o tal
debt
o uts tanding
and
dis burs ed 347 1,153 


D is burs em ents 18 189 P riv a te  S e c to r D e v e lo p m e n t 2000 2009 


T o tal
debt
s erv ic e 3 20 T im e
required
to 
s tart
a
bus ines s 
(days ) – 3 
IF C 
(fis c al year) C o s t
to 
s tart
a
bus ines s 
(%
o f
G N I
per
c apita) – 3.7 


T o tal
dis burs ed
and
o uts tanding
po rtfo lio 20 231 T im e
required
to 
regis ter
pro perty
(days ) – 3 





o f
whic h
IF C 
o wn
ac c o unt 20 231 


D is burs em ents 
fo r
IF C 
o wn
ac c o unt 16 159 R ank ed
as 
a
m ajo r
c o ns traint
to 
bus ines s 2000 2009 


P o rtfo lio 
s ales ,
prepaym ents 
and 


(%
o f
m anagers 
s urv eyed
who 
agreed) 





repaym ents 
fo r
IF C 
o wn
ac c o unt 0 8 





E c o no m ic 
and
regulato ry
po lic y
unc ertainty .. 44.7 





A ntic o m petitiv e
o r
info rm al
prac tic es .. 38.2 
M IG A 


G ro s s 
expo s ure 2 0 S to c k 
m ark et
c apitalizatio n
(%
o f
G D P ) 0.8 6.8 


N ew
guarantees 0 0 B ank 
c apital
to 
as s et
ratio 
(%) 30.5 17 .1 N o te:
F igures 
in
italic s 
are
fo r
years 
o ther
than
tho s e
s pec ified.

2009
data
are
prelim inary. 3/9/11 ..
indic ates 
data
are
no t
av ailable.

–
indic ates 
o bs erv atio n
is 
no t
applic able. D ev elo pm ent
E c o no m ic s ,
D ev elo pm ent
D ata
G ro up
(D E C D G ). 
 21 23 Millennium Development Goals Georgia With selected targets to achieve b etween 1990 and 2015 (es tim ate c lo s es t to  date s ho wn, +/‐ 2 years )   G e o r g ia G o a l  1:   h a lv e   t h e   r a t e s   f o r   e x t r e m e   p o v e r t y  a n d   m a ln u t r it io n 19 9 0 19 9 5 2000 2008 


P o v erty
headc o unt
ratio 
at
$ 1.25
a
day
(P P P ,
%
o f
po pulatio n)


 .. 4.6 9.6 13.4 


P o v erty
headc o unt
ratio 
at
natio nal
po v erty
line
(%
o f
po pulatio n)


 .. .. 52.1 21.3 


S hare
o f
inc o m e
o r
c o ns um ptio n
to 
the
po o res t
qunitile
(%)

 .. .. .. 5.6 


P rev alenc e
o f
malnutritio n
(%
o f
c hildren
under
5)


 .. .. 3.1 .. G o a l  2 :  e n s u r e   t h a t   c h ild r e n   a r e   a b le   t o   c o m p le t e   p r im a r y  s c h o o lin g 


P rim ary
s c ho o l
enro llm ent
(net,
%) 97 .. 100 94 


P rim ary
c o m pletio n
rate
(%
o f
relev ant
age
gro up)


 .. 84 99 100 


S ec o ndary
s c ho o l
enro llm ent
(gro s s ,
%)


 95 77 79 90 


Y o uth
literac y
rate
(%
o f
peo ple
ages 
15‐24) 100 .. 100 .. G o a l  3 :  e lim in a t e   g e n d e r   d is p a r it y  in   e d u c a t io n   a n d   e m p o we r   wo m e n 


R atio 
o f
girls 
to 
bo ys 
in
prim ary
and
s ec o ndary
educ atio n
(%)


 98 .. 99 98 


Wo m en
em plo yed
in
the
no nagric ultural
s ec to r
(%
o f
no nagric ultural
em plo ym ent)


 45 45 41 47 


P ro po rtio n
o f
s eats 
held
by
wo m en
in
natio nal
parliam ent
(%)


 .. 7 7 6 G o a l  4 :  r e d u c e   u n d e r ‐ 5   m o r t a lit y  b y  t wo ‐ t h ir d s 


Under‐5
mo rtality
rate
(per
1,000)


 47 45 45 30 


Infant
mo rtality
rate
(per
1,000
liv e
births )


 43 41 41 27 


M eas les 
im m unizatio n
(pro po rtio n
o f
o ne‐year
o lds 
im m unized,
%) 16 61 73 97 G o a l  5 :  r e d u c e   m a t e r n a l  m o r t a lit y  b y  t h r e e ‐ f o u r t h s 


M aternal
mo rtality
ratio 
(m o deled
es tim ate,
per
100,000
liv e
births )


 .. .. 32 30 


B irths 
attended
by
s k illed
health
s taff
(%
o f
to tal)


 .. .. 96 .. 


C o ntrac eptiv e
prev alenc e
(%
o f
wo m en
ages 
15‐49)


 .. .. 41 .. G o a l  6 :  h a lt   a n d   b e g in   t o   r e v e r s e   t h e   s p r e a d   o f   H IV /A ID S   a n d   o t h e r   m a jo r   d is e a s e s 


P rev alenc e
o f
H IV 
(%
o f
po pulatio n
ages 
15‐49)


 .. .. .. 0.1 


Inc idenc e
o f
tuberc ulo s is 
(per
100,000
peo ple)


 38 .. .. 84 


T uberc ulo s is 
c as e
detec tio n
rate
(%,
all
fo rm s ) 26 30 87 96 G o a l  7 :  h a lv e   t h e   p r o p o r t io n   o f   p e o p le   wit h o u t   s u s t a in a b le   a c c e s s   t o   b a s ic   n e e d s 


A c c es s 
to 
an
im pro v ed
water
s o urc e
(%
o f
po pulatio n) .. .. 76 99 


A c c es s 
to 
im pro v ed
s anitatio n
fac ilities 
(%
o f
po pulatio n) .. .. 83 93 


F o res t
area
(%
o f
to tal
land
area)


 .. .. 39.7 39 .7 


T erres trial
pro tec ted
areas 
(%
o f
s urfac e
area) .. .. .. 3.9 


C O 2
em is s io ns 
(m etric 
to ns 
per
c apita)


 3.2 0.5 1.0 1.4 


G D P 
per
unit
o f
energy
us e
(c o ns tant
2005
P P P 
$ 
per
k g
o f
o il
equiv alent)


 2.4 2.2 3.9 5.8 G o a l  8 :  d e v e lo p   a   g lo b a l  p a r t n e r s h ip   f o r   d e v e lo p m e n t       


T elepho ne
mainlines 
(per
100
peo ple)


 9.9 10.9 10.7 14.3 


M o bile
pho ne
s ubs c ribers 
(per
100
peo ple) 0.0 0.0 4.1 64.0 


Internet
us ers 
(per
100
peo ple)


 0.0 0.0 0.5 23.8 


P ers o nal
c o m puters 
(per
100
peo ple)


 .. .. 2.4 27.2 Education indicators (%) Measles immunization (% of 1-year ICT indicators (per 100 people) olds) 125 100 90 80 100 75 70 75 60 50 50 50 40 25 30 25 20 0 10 2000 2002 2004 2006 2008 0 0 1990 1995 2000 2007 2000 2002 2004 2006 2008 Primary net enrollment ratio Georgia Europe & Central Asia Fixed + mobile subscribers Internet users Ratio of girls to boys in primary & secondary education N o te:
F igures 
in
italic s 
are
fo r
years 
o ther
than
tho s e
s pec ified.

..
indic ates 
data
are
no t
av ailable. 3/9/11 D ev elo pm ent
E c o no m ic s ,
D ev elo pm ent
D ata
G ro up
(D E C D G ). 
 22 24 Georgia Social Indicators Latest single year Same region/income group Europe & Low er- Central m iddle- 1980-85 1990-95 2003-09 Asia incom e POPULATION Total population, mid-year (millions) 5.3 5.0 4.4 404.2 3,810.8 Grow th rate (% annual average for period) 0.8 -1.6 0.2 0.2 1.2 Urban population (% of population) 53.8 53.9 52.7 64.0 40.9 Total fertility rate (births per woman) 2.3 1.7 1.4 1.8 2.5 POVERTY (% of population) National headcount index .. .. 24.7 .. .. Urban headcount index .. .. 18.4 .. .. Rural headcount index .. .. 30.7 .. .. INCOME GNI per capita (US$) .. 610 2,540 6,793 2,298 Consumer price index (2005=100) .. 39 134 134 130 INCOME/CONSUMPTION DISTRIBUTION Gini index .. .. 40.0 .. .. Low est quintile (% of income or consumption) .. .. 5.6 .. .. Highest quintile (% of income or consumption) .. .. 46.0 .. .. SOCIAL INDICATORS Public expenditure Health (% of GDP) .. .. 2.0 3.5 1.8 Education (% of GNI) .. .. 3.3 4.4 4.0 Net prim ary school enrollm ent rate (% of age group) Total .. 97 94 92 87 Male .. 97 95 93 88 Female .. 97 92 92 86 Access to an im proved w ater source (% of population) Total .. .. 99 96 87 Urban .. .. 100 98 95 Rural .. .. 97 89 81 Im m unization rate (% of children ages 12-23 months) Measles .. 61 97 96 80 DPT .. 79 98 95 79 Child malnutrition (% under 5 years) .. .. .. .. 25 Life expectancy at birth (years) Total 70 70 71 69 68 Male 66 67 67 65 66 Female 74 74 75 74 70 Mortality Infant (per 1,000 live births) 48 41 39 19 43 Under 5 (per 1,000) 52 45 42 21 58 Adult (15-59) Male (per 1,000 population) 210 195 213 314 204 Female (per 1,000 population) 94 90 81 130 138 Maternal (per 100,000 live births) .. .. 30 32 230 Births attended by skilled health staff (%) .. .. .. 97 65 CAS Annex B5. This table w as produced from the CMU LDB system. 03/09/11 Note: 0 or 0.0 means zero or less than half the unit show n. Net enrollment rate: break in series betw een 1997 and 1998 due to change from ISCED76 to ISCED97. Immunization: refers to children ages 12-23 months w ho received vaccinations before one year of age or at any time before the survey. Source for poverty index 2009 - HIS (Integrated Household Survey) 


 23 25 Georgia - Key Economic Indicators Actual Estimate Projected Indicator 2005 2006 2007 2008 2009 2010 2011 2012 2013 National accounts (as % of GDP) a Gross domestic product 100 100 100 100 100 100 100 100 100 Agriculture 17 13 11 9 9 8 7 7 7 Industry 27 25 24 22 22 17 16 15 14 Services 56 62 65 69 69 75 77 78 79 Total Consumption 84 94 93 103 106 101 101 98 96 Gross domestic fixed investment 28 26 26 21 15 15 16 18 19 Government investment 6 8 9 8 8 8 7 6 6 Private investment 22 18 17 13 7 7 9 12 13 b Exports (GNFS) 34 33 31 29 30 35 37 38 39 Imports (GNFS) 52 57 58 58 49 53 56 55 55 Gross domestic savings 16 6 7 -3 -6 -1 -1 2 4 c Gross national savings 22 15 15 4 2 7 5 7 9 Memorandum items Gross domestic product 6411 7762 10172 12867 10767 11533 12819 13479 13946 (US$ million at current prices) GNI per capita (US$, Atlas method) 1360 1680 2090 2460 2540 2740 2800 3000 3190 Real annual growth rates (%, calculated from 94 prices) Gross domestic product at market prices 9.6 9.4 12.3 2.3 -3.8 6.3 5.5 4.7 4.8 Gross Domestic Income 9.6 9.4 12.3 2.3 -3.8 8.1 6.5 4.8 4.7 Real annual per capita growth rates (%, calculated from 94 prices) Gross domestic product at market prices 8.5 8.5 12.6 2.4 -3.8 6.2 5.4 4.7 4.8 Total consumption 4.8 21.1 10.8 13.7 -0.7 1.4 7.1 2.3 2.2 Private consumption -0.8 27.5 1.1 11.3 2.1 2.5 6.7 0.3 1.3 Balance of Payments (US$ millions) b Exports (GNFS) 2187 2552 3182 3688 3207 4057 4736 5138 5472 Merchandise FOB 1472 1667 2088 2428 1894 2453 2832 3061 3240 b Imports (GNFS) 3318 4413 5917 7499 5266 6104 7128 7468 7686 Merchandise FOB 2687 3686 4984 6261 4293 4979 5765 6034 6202 Resource balance -1131 -1861 -2734 -3811 -2059 -2048 -2392 -2330 -2214 Net current transfers 359 524 689 1060 967 1074 1073 1059 1042 Current account balance -709 -1174 -2008 -2915 -1210 -1154 -1601 -1550 -1462 Net private foreign direct investment 542 1186 1675 1523 659 575 706 809 837 Long-term loans (net) -88 360 113 846 654 632 647 457 1723 Official -4 -46 14 185 383 483 391 240 366 Private -84 406 99 661 271 149 256 217 1357 Other capital (net, incl. errors & ommissions) 346 35 147 1219 526 -128 608 386 -1018 d Change in reserves -91 -407 73 -672 -629 75 -360 -101 -80 Memorandum items Resource balance (% of GDP) -17.6 -24.0 -26.9 -29.6 -19.1 -17.8 -18.7 -17.3 -15.9 Real annual growth rates ( YR94 prices) Merchandise exports (FOB) 13.2 7.9 19.1 -1.5 -3.1 7.9 12.1 8.4 5.2 Merchandise imports (CIF) 13.3 7.3 20.5 5.7 -14.0 5.5 14.1 4.7 1.8 (Continued) 
 24 26 Georgia - Key Economic Indicators (Continued) Actual Estimate Projected Indicator 2005 2006 2007 2008 2009 2010 2011 2012 2013 e Public finance (as % of GDP at market prices) Current revenues 23.7 26.1 28.9 30.7 29.3 28.1 27.2 26.4 26.3 Current expenditures 20.1 22.2 25.0 28.3 30.1 26.2 23.6 22.8 22.4 Current account surplus (+) or deficit (-) 3.6 3.8 3.9 2.4 -0.8 1.9 3.6 3.7 3.9 Capital expenditure 5.9 7.6 9.0 8.8 8.4 8.9 7.6 6.9 6.6 Foreign financing 0.2 0.2 0.6 7.3 4.1 4.6 3.1 1.9 5.0 Monetary indicators M2/GDP 16.4 19.3 23.4 22.3 25.6 26.3 28.6 28.6 27.8 Growth of M2 (%) 26.4 39.3 49.6 7.0 8.1 17.6 23.2 11.6 7.7 Private sector credit growth / 171.4 414.8 115.7 282.9 223.9 104.1 171.4 170.1 164.4 total credit growth (%) Price indices( YR94 =100) Merchandise export price index 410.6 430.7 453.1 534.6 430.5 516.5 532.0 530.3 533.5 Merchandise import price index 290.8 371.9 417.2 495.7 395.1 434.6 441.1 441.1 445.5 Merchandise terms of trade index 141.2 115.8 108.6 107.9 109.0 118.9 120.6 120.2 119.8 f Real exchange rate (US$/LCU) 100.0 99.9 100.4 110.0 105.9 110.5 113.6 115.8 117.9 Consumer price index (% change) 8.3 8.8 11.0 5.5 3.0 11.2 8.0 6.5 6.0 GDP deflator (% change) 7.9 8.5 9.7 9.7 -2.0 7.6 7.5 6.5 5.7 a. GDP at factor cost b. "GNFS" denotes "goods and nonfactor services." c. Includes net unrequited transfers excluding official capital grants. d. Includes use of IMF resources. e. Consolidated central government. f. "LCU" denotes "local currency units." An increase in US$/LCU denotes appreciation. 
 
 

 
 
 25 27 Georgia - Key Exposure Indicators Actual Estimated Projected Indicator 2005 2006 2007 2008 2009 2010 2011 2012 2013 Total debt outstanding and 2095 2936 3936 5664 6254 7148 7948 8221 8420 a disbursed (TDO) (US$m) a Net disbursements (US$m) 245 1128 1378 2319 1348 1569 1685 1517 2054 Total debt service (TDS) 316 287 378 591 758 676 885 1245 1855 a (US$m) Debt and debt service indicators (%) b TDO/XGS 78.1 86.2 90.4 112.7 149.0 146.5 141.5 135.6 133.3 TDO/GDP 32.7 37.8 38.7 44.0 58.1 62.0 62.0 61.0 60.4 TDS/XGS 14.5 11.3 11.9 16.0 23.6 16.7 18.7 24.2 33.9 Concessional/TDO 64.4 57.8 45.5 38.7 42.6 39.7 42.2 42.0 41.5 IBRD exposure indicators (%) IBRD DS/public DS .. .. .. .. 1.0 1.9 3.6 3.2 1.5 Preferred creditor DS/public 48.1 44.8 43.9 56.4 62.8 58.1 67.6 82.8 49.1 c DS (%) IBRD DS/XGS .. .. .. .. 0.0 0.1 0.2 0.2 0.3 d IBRD TDO (US$m) 0 0 0 0 100 173 255 319 365 Of which present value of guarantees (US$m) Share of IBRD portfolio (%) 0.0 0.0 0.0 0.0 0.0 0.2 0.3 0.4 0.4 d IDA TDO (US$m) 679 785 885 989 1153 1185 1258 1338 1378 a. Includes public and publicly guaranteed debt, private nonguaranteed, use of IMF credits and net short- term capital. b. "XGS" denotes exports of goods and services, including workers' remittances. c. Preferred creditors are defined as IBRD, IDA, the regional multilateral development banks, the IMF, and the Bank for International Settlements. d. Includes present value of guarantees. e. Includes equity and quasi-equity types of both loan and equity instruments. 

 26 28 Statement of IFC's Committed and Outstanding Portfolio Amounts in US Dollar Millions Accounting Date as of : 01/31/2011 Region(s):Europe & Central Asia Country(s) : Georgia Commitment Institution LN ET QL + QE GT RM ALL ALL LN ET QL + QE GT RM ALL ALL Fiscal Year Short Name Cmtd - IFC Cmtd - IFC Cmtd - IFC Cmtd - IFC Cmtd - IFC Cmtd - IFC Cmtd - Part Out - IFC Out - IFC Out - IFC Out - IFC Out - IFC Out - IFC Out - Part 2000/ 2003/ 2009/ 2010/ Bank of Georgia 41.67 0 50.00 7.37 11.72 110.75 0 41.67 0 50.00 7.37 6.47 105.51 0.00 2011 2008/ 2009/ 2010 Bank Republic 40.78 0 7.00 0 0 47.78 0 20.78 0 7.00 0 0 27.78 0.00 29 2004 BTC Pipeline 10.12 0 0 0 0 10.12 7.84 10.12 0 0 0 0 10.12 7.84 2009 Rakeen Georgia 27.00 7.65 0 0 0 34.65 0 19.60 7.65 0 0 0 27.25 0.00 2006 TAV Georgia 18.43 0 0 0 0 18.43 0 18.43 0 0 0 0 18.43 0.00 1998/ 2000/ 2002/ 2005/ TBC Bank 31.65 31.43 22.50 0 3.96 89.54 0 0 31.43 22.50 0 2.24 56.17 0.00 2006/ 2007/ 2008/ 2009 1999 TbilComBank 0.00 0 0 0 0 0.00 0 0.00 0 0 0 0 0.00 0.00 2008 Tbilisi Central 8.50 0 0 0 0 8.50 0 8.50 0 0 0 0 8.50 0.00 Total Portfolio 178.16 39.08 79.50 7.37 15.67 319.78 7.84 119.10 39.08 79.50 7.37 8.71 253.77 7.84 
 
 
 
 29 Georgia Selected Indicators* of Bank Portfolio Performance and Management As Of Date 3/7/2011 Indicator 2008 2009 2010 2011 Portfolio Assessment a Number of Projects Under Implementation 15 11 12 10 b Average Implementation Period (years) 3.9 3.8 3.7 4.4 a, c Percent of Problem Projects by Number 13.3 9.1 8.3 10.0 a, c Percent of Problem Projects by Amount 9.3 3.4 11.7 11.1 a, d Percent of Projects at Risk by Number 20.0 9.1 8.3 40.0 a, d Percent of Projects at Risk by Amount 10.5 3.4 11.7 24.1 e Disbursement Ratio (%) 52.9 77.0 113.1 43.1 Portfolio Management CPPR during the year (yes/no) Yes Supervision Resources (US$ thousands) 1400 1515 1578 1180 Average Supervision (US$ thousands/project) 93.3 137.7 131.5 118 Since FY Memorandum Item 80 Last Five FYs Proj Eval by OED by Number 35 14 Proj Eval by OED by Amt (US$ millions) 729.8 195.8 % of OED Projects Rated U or HU by Number 22.9 21.4 % of OED Projects Rated U or HU by Amt 32.9 15.4 a. As shown in the Annual Report on Portfolio Performance (except for current FY). b. Average age of projects in the Bank's country portfolio. c. Percent of projects rated U or HU on development objectives (DO) and/or implementation progress (IP). d. As defined under the Portfolio Improvement Program. e. Ratio of disbursements during the year to the undisbursed balance of the Bank's portfolio at the beginning of the year: Investment projects only. * All indicators are for projects active in the Portfolio, with the exception of Disbursement Ratio, which includes all active projects as well as projects which exited during the fiscal year. 
 28 30 Georgia: IFC Investment Operations Program 
 2008 2009 2010 2011* Commitments (US$m) Gross 42.69 238.65 36.71 4.54 Net** 42.69 238.65 36.71 4.54 Net Commitments by Sector (%) EQUITY 16.83 11.52 GUARANTEE 26.45 100 LOAN 66.77 58.1 54.48 QUASI LOAN 16.4 28.7 RISK PRODUCT 1.68 19.07 Total 100 100 100 100 Net Commitments by Investment Instrument (%) Equity 16.83 11.52 Guarantee 26.45 100 Loan 66.77 58.1 54.48 Quasi loan 16.4 28.7 Risk product 1.68 19.07 Total 100 100 100 100 * As of February 28, 2011 ** IFC's Own Account only 
 
 
 
 
 29 31 Summary of Nonlending Services 
 As of 03/07/2011 
 Cost a b Product FY (US$000) Audience Objective Recent completions JNA Progress Report FY10 37 G, D, B, PD K, PS, PD Programmatic Poverty Assessment FY10 81 G, D K, PS High Level Agriculture Workshop FY10 48 G, B K, PS Financial Sector Advisory FY10 127 G, D, B K, PS Business Enabling Environment (IFC) FY10 1500 G, D, B,PD K Corporate Governance (IFC) FY11 1808 G,D,B,PD K, PS,PD Trade and Development in South Caucasus FY11 100 G,D K, PS Underway/Planned Regional Standards & Quality Infrastructure FY10-11 100 G, D K, PS Regional Programmatic Poverty Assessment FY11 125 G, D K, PS Improving Sustainability of Road Mgt & Financing FY11 55 G, D, B K, PS Regional Financial Sector Advisory FY11 90 G, D, B K, PS National Statistics System Development Strategy FY11 300 G K, PS Georgia Book on Anti-Corruption Reforms FY11-12 200 G, D, B, PD K, PD Programmatic Public Expenditure Review FY11-12 300 G, D, B K, PS Rural Investment Climate Assessment FY11-12 75 D, D, B, PD K, PS, PD Analysis on Sources of Growth FY12-13 100 G, D, B, PD K, PD, PS Policy Notes FY13 100 G, D, B K, PS Regional Broadband Competitiveness Program FY11-13 70 G, D,PD K, PD, PS South Caucasus Skills Study FY12-13 100 G,D,B,PD K, PD, PS Advisory to banks: NPLs, Housing (IFC) FY12 1010 G, B, PD K, PS, PD Tax Simplification (IFC) FY12 840 G,D,B K, PS Dialogue on PPPs in Infrastructure (IFC) FY13 1700 G, D, B, PD K, PS, PD Food Safety (IFC) FY13-14 1125 G, B, PD K, PS,PD ____________ a. Government, Donor, Bank, Public Dissemination. b. Knowledge Generation, Public Debate, Problem-Solving. 
 
 
 
 
 
 
 
 
 30 32 Operations Portfolio (IBRD/IDA and Grants) As of 03/07/2011 Closed Projects 42 IBRD/IDA * Total Disbursed (Active) 349.30 of w hich has been repaid 0.00 Total Disbursed (Closed) 569.65 of w hich has been repaid 51.56 Total Disbursed (Active + Closed) 918.95 of w hich has been repaid 51.56 Total Undisbursed (Active) 150.35 Total Undisbursed (Closed) 0.90 Total Undisbursed (Active + Closed) 151.26 Active Projects Difference Between 33 Last PSR Expected and Actual Supervision Rating Original Amount in US$ Millions Disbursements a/ Development Implementati Fiscal Frm Project ID Project Name IBRD IDA GRANT Cancel. Undisb. Orig. Objectives on Progress Year Rev'd P040555 HEALTH SECTR DEVT S S 2003 20.3 4.56 0.62 -0.22 P086277 SEC/LOC ROADS S MS 2004 70 20 19.49 -51.51 9.11 P078544 RURAL DEVT MS MS 2005 10 2.13 1.93 P063081 PUB SECTR FM REFORM MS MS 2006 3 2.79 2.64 P099808 AVIAN FLU - GE MS MS 2006 7 3.79 3.09 P083110 HIGHWAY IMPROVEMENT 1 S MS 2007 28 19 13.06 -16.09 -3.95 P094044 HIGHWAY IMPROVEMENT 2 MS MU 2008 55 1.59 -17.72 1.69 P110126 REGIONAL & MUNICIPAL INFRA DEV S S 2009 33.5 51.5 27.51 -33.08 -18.03 P112523 EW HIGHWAY IMP 3 S MS 2010 147 66.48 43.48 P117152 KAKHETI REGIONAL ROADS S S 2010 30 8.95 -6.80 Overall Result 308.5 185.8 150.35 -73.44 -11.39 31 33